Last Updated on Apr 8, 2020 by James W
A SIPP is a self-invested personal pension, and has become an increasingly popular option for those planning for retirement. Boasting a number of benefits which are not included in other pension plans, SIPPs can offer one of the best incomes for retirement, although that does not mean they are without risk. Here are some of the main benefits of investing in a SIPP.
Control Over Investment
One aspect of a SIPP which draws many people in is the fact that they give you a much greater level of control over where you invest their money and how it is managed. Other types of pension typically offer far less control, as they are usually invested in a pre-selected fund.
With the ability to research and invest in markets of your choosing, you can have the advantage of deciding which investment options are likely to be most profitable. It also means, however, that you may take on more risk, given that you could choose more volatile assets.
Portfolio Diversification
Investing in a SIPP means choosing exactly what you put in your investment portfolio. This can be as diverse as you like, although those which are less diverse are bound to be riskier. You might, for instance, invest in the shares of an up and coming startup (which are considered high risk/high reward) and counterbalance the risk by also investing in a more established company.
You do not have to invest in shares though, and you can spread your investments across as many different asset classes as you like. Getting a grasp of how different assets behave on the market will help you understand which assets would be best for your long-term investment strategy.
Tax Benefits
SIPPs are without a doubt one of the most tax efficient pension schemes, as they offer major tax cuts based on your income tax bracket. In effect, the more you earn, the more you save with a SIPP.
This makes them ideally suited to those who earn more, as they are likely to receive a much greater return on their investment. That is not to say, however, that they are not an effective option for those on lower incomes too.
Expert Advice
Most SIPP providers, such as Bestinvest, also offer the services of their expert advisers, who can help you to choose and manage your investments. This is an invaluable tool to have, and can go a long way in ensuring that your investments are as well informed and strategic as possible.
The service is charged on top of the SIPP fee, but in many cases the potential for greater overall profits will more than make up for this. It is worth researching the facilities any SIPP provider offers to best determine if they have your needs as an investor covered.
It is worth noting that SIPPs are not for everyone, and those that prefer a more secure, basic pension plan would most likely be better off choosing a different scheme. SIPPs offer investment independence and are perfect for those wishing to have full control over their retirement planning.
